I often say that hiring employees may be the worst thing a small business can do. What I really mean is, hiring employees without knowing what you’re getting into is the worst thing a business can do.
Tax Considerations of Hiring Employees:
- You’ll need to get set up with the IRS and the state for withholdings and payroll taxes
- You’ll need to withhold taxes from your employees’ pay each payday
- Your company will owe payroll taxes on the wages you pay to the employees
- You’ll need to submit those withholdings and payroll taxes to the government periodically
Other (Non-Tax) Considerations:
- You’ll probably need to have workers’ comp insurance. This can get expensive, especially if your employees are performing manual labor or working on roofs.
- There are all sorts of HR issues to deal with. Someone has to manage the employees, determine work schedules, determine how much vacation time they get, and on and on it goes. Managing employees is hard, and the task of managing will generally fall on your shoulders as the business owner, at least at first.
- Can you afford to consistently pay employees? If you hire employees, you better be able to make payroll each payday. You also need to put some thought into whether or not you can keep the employee busy — and paid — long-term.
- Can you afford to consistently pay the payroll taxes? The government gets very grumpy when you fall behind on your payroll tax deposits.
So to repeat: I’m not saying “don’t hire employees.” What I’m saying is: know what you’re getting into before you hire employees.
Image courtesy of user Nemo on Pixabay.com
“This blog post, along with comments that may follow, should not be considered tax advice. Before you make final tax or financial decisions, please secure a professional tax advisor to give you advice about your unique situation. To secure Jason as your accountant, please click on the ‘Services’ link at the top of the page.”